Business finance is a broad term used to describe different things regarding the study, development, management, and allocation of funds. This includes financial problems arising in the business field such as purchasing of products or services, investment of resources, lease of premises, and so on. The main objective of business finance is the efficient management of a company’s finances and therefore it includes all the financial aspects of conducting the business activities of a company. Business finance therefore can be either a process of planning for the future or a tool to achieve current business results. In other words, business finance is concerned with all the aspects of business that are concerned with the financial well-being of a business.
One of the most important aspects of business finance is financial planning. It deals with the allocation of capital between the different projects of a company so that they may generate profits. There are two main techniques of capital allocation: use of retained earnings and use of new capital. Recourse capital is capital that a company gets by any legal action; it is mainly obtained to satisfy the obligations arising out of contracts.
Besides, business finance is also concerned with other financial aspects such as obtaining finance for start up ventures, expanding existing ventures, dealing with debt, acquiring and developing capital assets, merging with other companies, and so on. These different aspects of business finance have a direct or indirect effect on the cash flows of a company. Therefore, proper business finance planning is necessary in order to meet the needs of the company in different situations. For instance, it may be impossible to obtain necessary capital assets during startup unless proper business finance is planned. A well planned finance system enables the entrepreneur to acquire the capital assets whenever the need arises.